Courageous!

Conventional wisdom says that because pensioners vote in large numbers, they can only ever be given more and more. Not, generally speaking, increases to the nominal value of the pension, but rather the extra benefits package. So I guess it took real courage for the Chancellor to announce he will be phasing out one of those extra benefits for those pensioners rich enough to benefit from an extra tax break. Kudos to him for that at least!

The big question over the budget is of course whether it’s consistent with reducing that outrageous deficit. If it is, then the minor reductions in personal tax are to be welcomed. Definitely to be applauded (if it happens) is the reduction in paperwork promised .by the integration of different elements of taxation (headline tax and NI) in a single system.

One to watch is the falling rate of corporation tax. My first reaction to that was why not reduce the jobs tax instead to try and stimulate employment? On reflection, maybe what he’s done will bring in better returns, which could in turn support economic activity including not least employment. That could have potential to attract business to site headquarters here, and domicile here for tax purposes, which could in turn do very nicely for the overall tax take – so long as we’re not in a competitive race to the bottom. But in a country that resents successful businesses, that could bring its own political trouble.

On the downside there seems to be more complexity and obfuscation in some areas. The much-trailed changes to child allowances is a classic of gratuitous complexity. Can’t see how the measures to stop tax avoidance on very high value properties are going to work: surely it can’t be too hard to work around the rules? E.g. put the property in a UK shell company, which is in turn owned by a company in an offshore tax haven which can then be bought and sold at will. And the ‘tycoon tax’ seems slightly at odds with existing higher limits on the kind of tax-efficient vehicles I use, so only the real ultra-rich (like premiership footballers) will be able to use their VCT and especially EIS allowances. Not that I’ll get anywhere near that limit myself!

I do wonder about possibly-unintended consequences. We now know (as we could already guess) that those on the highest incomes brought forward their tax liabilities ahead of the “50p” rate, thus very substantially flattering the pre-election figures. Pre-announcing a reduction will likely do something similar in reverse, so tax take next year will be reduced as people defer liabilities. More money printing to fill a hole?

Not sure how to summarise. I guess we should be grateful there’s nothing worse amongst what’s new, and the daftest bits appear to be mostly on the fringes of it.

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Osborne certainly is courageous in that he’s managed to offend the Daily Mail reading classes at least twice, once with the so-called Granny Tax (although it’s hard to see how the modest reduction of an expected future concession to wealthier pensioners can be called a “tax” at all) and a second time by not deferring August’s fuel duty rise despite record prices at the pumps. Seems the guy’s got principles after all. And the saner end of the business community seem to have welcomed the general thrust of the budget, which is a relief to those of us who actually want this country to succeed in a fast-moving, competitive world.

Probably a 7 out of 10 budget – I would have given it 8 except for the silliness that you rightly refer to over the labyrinthine complexity of the child benefit concession and the piecemeal and ineffective “wealth tax” measures on property and other avoidance schemes.